Media Division
Revenues from the Company's Media division increased 12% to $76.2 million with growth coming from the launch of WWE Network as well as from increased television and home entertainment revenue as described below.
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Network revenues, which include revenue generated by WWE Network, pay-per-view and video-on-demand, increased 15% to $18.4 million from $16.0 million in the prior year quarter as the ramp-up of network subscribers and subscription revenue more than offset a decline in pay-per-view revenue. WWE Network, a 24/7 streaming network that provides access to live and scheduled programming, including all 12 live pay-per-view events, as well as a comprehensive video-on-demand library, launched on February 24, 2014. The network generated $4.4 million in subscription revenue with approximately 495,000 subscribers at quarter-end, and a retail price of $9.99 per month. Following the broadcast of WrestleMania 30, which aired live April 6th on WWE Network and on pay-per-view through cable and satellite providers, the Company announced that WWE Network had reached over 667,000 subscribers(1). The $4.4 million in network subscription revenue was partially offset by a $1.3 million decline in pay-per-view revenue. Pay-per-view revenue declined 9% to $13.8 million driven by a 10% decline in buys for the Company’s Royal Rumble and Elimination Chamber events that reflected weaker performance in several international markets. None of the pay-per-view events in the current year quarter were included on WWE Network.
The details for the number of buys (in thousands) are as follows:
| Three Months Ended | ||||||||||||
| Broadcast | Events (in chronological order) | March 31, | March 31, | |||||||||
| January | Royal Rumble® | 467 | 512 | |||||||||
| February | Elimination Chamber™ | 183 | 213 | |||||||||
| Prior events | 28 | 20 | ||||||||||
| Total | 678 | 745 | ||||||||||
(1) Current subscriber number assumes full compliance with subscription terms (including the six month commitment).
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Television revenues increased 8% to $40.6 million from $37.7 million in the prior year quarter primarily due to the second season production and monetization of Total Divas, a program that debuted in July 2013, and contractual increases for existing programs. Additionally, the increase in television revenues reflected the timing of one additional episode of Raw in the U.S. (due to an additional Monday in the first quarter of 2014 as compared to the first quarter of 2013).
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Home Entertainment net revenues increased to $10.5 million from $7.0 million in the prior year quarter reflecting adjustments related to prior year sell-through estimates and contractual guarantees. Specifically, the quarter reflected the recognition of a $2.5 million minimum guarantee short-fall related to 2013 sales and a $2.2 million adjustment for higher current sell-through rates than anticipated for late 2013 releases. As a result of the latter adjustment, returns represented 24% of gross domestic retail revenue as compared to 49% in the prior year quarter. These factors were partially offset by a 17% decline in the average effective price to $7.88 and an 11% decline in units shipped.
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Digital Media net revenues were $6.7 million compared to $7.1 million in the prior year quarter. Lower newsstand revenue from the Company’s print magazine more than offset the increased monetization of video content across various digital platforms.
Live Events
Live Event revenues increased 3% to $21.7 million from $21.0 million in the prior year quarter primarily due to an increase in the average effective price across our events in North America. The impact of staging three additional events in North America was essentially offset by the timing of three fewer events in international markets.
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There were 80 total events in the current quarter that were held in North America as compared to 80 total events in the prior year quarter, which included 77 events in North America and 3 events in international markets.
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North American events generated revenues of $21.7 million as compared to $20.0 million in the prior year quarter. The $1.7 million increase was driven by a 6% rise in average ticket prices to $41.82 that was attributable, in part, to changes in venue mix and, to a lesser extent, the introduction of VIP ticket packages, which were initiated in the second quarter of 2013. Average attendance of 6,400 fans at North American events was essentially unchanged from the prior year quarter.
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International live event revenues declined $1.0 million reflecting three fewer international events.
Consumer Products Division
Revenues from Consumer Products businesses were $23.2 million as compared to $32.6 million in the prior year quarter, primarily due to the decline in the Company's video game licensing royalties as described below.
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Licensing revenues were $14.0 million as compared to $24.0 million in the prior year quarter, primarily driven by the transition to a new video game partner, Take-Two Interactive, and contractual changes in the Company's licensing agreement. Estimated North American unit sales for our franchise game at retail were effectively unchanged versus the prior year period and compared favorably to a 33% industry decline in current generation software sales. Additionally, video game revenues in the prior year quarter were positively impacted by a $2.0 million benefit associated with the termination of our agreement with our former video game licensee, THQ.
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Venue Merchandise revenues decreased 2% to $5.0 million from $5.1 million in the prior year quarter primarily due to a 6% decline in per capita merchandise sales at domestic events to $9.64 in the current year quarter, which more than offset a 4% increase in total attendance at those events.
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WWEShop revenues increased 20% to $4.2 million as compared to $3.5 million in the prior year quarter based on a 16% increase in the volume of online merchandise sales to approximately 85,000 orders. Orders increased primarily due to mobile shop optimization and a new partnership with Amazon UK. The average revenue per order was essentially unchanged from the prior year quarter.
WWE Studios
WWE Studios revenue increased to $4.3 million from $1.9 million in the prior year quarter due primarily to the strong performance of The Call, which was released theatrically in March 2013. WWE Studios' movie portfolio generated income of $1.6 million in the quarter compared to a loss of $5.0 million in the prior year quarter, which included $4.7 million in film impairment charges. Recent movies, such as Scooby Doo! WrestleMania Mystery (direct-to-DVD) and Oculus (theatrical), released in March and April, 2014, respectively, have shown strong performances that are in-line with expectations. The Company’s movie releases since late 2012 are expected to generate an IRR of over 15%, which exceeds the Company’s estimated cost of capital.
